FHA Will Repay Portion of Loan-Insurance Premiums
Question: I saw an ad in one of those magazines that you see at the checkout counters in drugstores where this company was looking for people who had paid off their FHA mortgages early, and it suggested that this outfit--for a fee, I assume--would help these people get back a refund from the government for the FHA insurance premiums owed to them. This raised a lot more questions than it answered, particularly because we did pay off our FHA mortgage early a couple of years ago. What’s this all about?--W.B.
Answer: Tickled your curiosity all right, but not enough, apparently, to the point of buying the magazine and responding to the ad. That was shrewd of you. The ad, as far as it went, is accurate enough: Whenever a home buyer pays off his Federal Housing Administration-insured loan earlier than the normal 30-year period (and the FHA is an agency of the U.S. Department of Housing and Urban Development), he’s entitled to a refund of a substantial portion of the insurance premiums he has paid over the years. The insurance, of course, is intended to reimburse lenders for any losses resulting from defaulting home buyers.
Even though FHA loans, nationally, have been running at a default rate higher than normally experienced, the actual losses to lenders haven’t been all that great, because most of the homes ending up on the auction block (after foreclosure) have sold for enough to satisfy the indebtedness.
Complex Formula
How much you will get back in the way of a refund, says a HUD spokesman in Washington, depends on how much you have paid in premiums and how much you’ve foreshortened the payoff period.
Technically, when you pay an FHA mortgage off early, the lender is supposed to tell you about this refund at the time and help you make application for it. Some do, and some don’t.
The entrepreneurs who ran the ad offering to help in this procedure aren’t doing anything illegal, and, according to HUD, it’s gotten to be pretty popular in some parts of the country. However, it’s not so complicated that you can’t do it yourself, and, in some instances, the fees charged by these people amount to as much as a third of the refund due their clients.
While generalizations are always dangerous, the HUD spokesman ventured a guess that--depending on the factors already mentioned--the refunds tend to range in the $500-to-$1,000 range, with gusts up to $1,500.
How do you go about it? First, go back to the lender who held your trust deed and get the application form for the insurance premium refund. If he’s contrite enough about dropping the ball in the first place, he should be happy to help you fill it out now. Even if he doesn’t make such an offer, it’s not that difficult to do yourself.
Once you’ve filled out the application, mail it to: Deputy Assistant Secretary, Single Family Housing and Mortgagee Activities, Room 9282, Department of Housing and Urban Development, 451 7th Ave. S.W., Washington, D.C.
While the dollar amount you’ll receive is difficult to predict, the HUD spokesman said, it will be a substantial percentage of the premiums you have actually paid, and the monthly amount (if you still have your old stubs filed away) is clearly spelled out.
Another piece of good news: The refund check that you’ll receive from HUD will also be tax-free .
Q: We inherited two Treasury bonds that have coupons attached. For years we were able to cut them off and cash them at our savings and loan as they came due, without charge.
Now, all of the banks and savings and loans are charging a $4.50 service fee per coupon. One bond’s interest is for $10, and the other is for $20. I think $9 for obtaining the small sum of $30 is outrageous. How we can cash these coupons without having to pay a fee?
Another funny thing I don’t understand about these bonds is that right on the face of it is printed that they can be redeemed in 1988, yet when we tried to do so the “powers that be” in the government told us we couldn’t cash them until 1993. Have you any thoughts on this curious ruling?--M.T.
A: A “service fee” amounting to about 30% of the amount being realized is a little steep even in a society that has become accustomed to interest rates of 19% and 20% on credit-card purchases.
However, a spokesman for the thrift industry confirms that fees for services that used to be free are all the rage now. How would you feel about turning in those “bearer” coupons on your bonds for a fat “fee” of either nothing or, at the most, 50 cents?
Redeem at the Bank
The simplest way to redeem the coupons for the interest due, according to Anna Villafuerte, a spokesperson for the Federal Reserve Bank of Los Angeles, is to simply take them down to the bank (at 950 S. Grand Ave.), fill out a form, turn in the coupons, and a check for the interest due will be mailed to you.
However, I’ve given your name and address to Villafuerte, and she is going to send you the form (Securities Surrendered for Redemption or Exchange). Fill it out and return it with the coupons and the check will be forthcoming.
Anyone else having Treasury bond coupons due for redemption can send for the form at the Federal Reserve Bank of Los Angeles’ mailing address: P.O. Box 2077, Terminal Annex, Los Angeles, Calif. 90051, and follow the same procedure when you receive the form--total cost: 50 cents for postage.
The “redemption” date (1988) printed on the bonds you have, Villafuerte adds, is applicable only if the Treasury has called the bonds in for redemption, which it hasn’t done. The actual maturity date on those bonds is 1993.
